Xceligent’s Shutdown Raises Questions of Competitiveness in CRE data

OP-ED by Karen Schutte

Best competitors should hope for is to carve out their own niche around CoStar’s edges

Shortly before the holidays, Xceligent closed its doors following a year-long battle with larger company, CoStar. These two commercial real estate data firms, had been in legal battle with each other for almost one year to the day: CoStar, the $9 billion data giant versus Xceligent, a little known real estate data firm.

The legal battle centered around CoStar’s claims that Xceligent stole and resold its proprietary content. CoStar has previously won multiple suits against competitors with similar claims. In June, Xceligent tried to fight back with an antitrust countersuit alleging CoStar has engaged in years of monopolistic business practices and anticompetitive behavior.

As recently as a week before Xceligent’s closing, CoStar and Xceligent were discussing a settlement. But talks broke down when CoStar wanted Xceligent to delete material in its database as part of that settlement.

It’s no secret that CoStar is litigious. Since 2004 CoStar has filed at least 31 federal lawsuits against users and competitors according to court records.

However, Xceligent’s shutdown raises questions of competitiveness in the commercial real estate data domain. In 2012, the Federal Trade Commission approved CoStar’s acquisition of Loopnet for $860 million with set conditions to prevent CoStar from becoming a monopoly. This included forcing the spin-off of Xceligent that was then owned by Loopnet.

London-based Daily Mail and General Trust (DMGT), acquired Xceligent as part of the CoStar / Loopnet deal and invested $150M to expand the platform into the largest U.S. markets. Then on December 14th the owners of Xceligent, filed for Chapter 7 bankruptcy liquidation, and are waiting a court-appointed trustee to distribute the company’s assets.

In late November, DMGT wrote its subsidiary’s carrying value down to zero amid lower-than-expected revenues from its push into New York City. The company previously said it had spent £14 million ($19 million USD) in legal fees over the last 12 months, primarily due to Xceligent’s lawsuit.

CoStar has grown through acquisition – more than 20 acquisitions in nearly 30 years – has grown the data behemoth’s market power. As a result, the best regional startup competitors can hope for is to carve out their own niche around CoStar’s edges, companies such as Vizzda in Phoenix and RED Comps in Tucson have done just that.

CoStar (NASDAQ:CSGP) went public in 1998 at $9 a share and closed on January 2 at $296.79.